The process of fund selection has become more institutionalised than in the past. Gone are the days where one person can make a decision on product selection. Today several teams collaborate to build and maintain a product shelf. Asia teams are becoming more involved in the process, even if the decision-making is often officially centralised outside the region.
The approach adopted by distributors – chiefly private banks, consumer banks and insurers – can vary widely. Some individuals are knee-deep in due diligence, while others serve as key cogs in the investment advisory process. Both functions are required to balance the interests of the institutions and the end-clients they represent.
With this in mind, AsianInvestor launched a project to identify the leading protagonists in fund selection and distribution. We worked on this project from a product providers’ point of view, with the aim of helping them to increase the penetration rate of mutual funds in client portfolios.
Our first list of the 25 most influential in fund selection focused on individuals based in Asia’s two top global hubs: Hong Kong and Singapore. We began with a long list and whittled it down based on public opinion and our own research.
Our choices represent key touch points for fund providers in this region. Building relationships with these individuals can be the difference between getting on a distributor’s shelf or not.
The list appears in full in the November issue of AsianInvestor magazine. We will publish the write-ups in alphabetical order over the coming weeks, starting today.
Head of managed investments and advisory for Asia Pacific
Citi Private Bank
Having joined Citi five years ago, Roger Bacon’s role is entirely investment-focused covering mutual funds, separately managed account, hedge funds, private equity, real estate and discretionary. He works with fund selectors within the bank to choose the best ideas to put in front of bankers and clients, including those that are not currently on the platform.
Bacon meets up to 40 fund managers a month, both existing providers and new ones that he might refer to the due diligence team. His time is highly prized as Citi Private Bank ranks among the largest in Asia by AUM.
In the past the firm had a stronger focus on market trading, but since Bacon joined fund penetration has increased. Where previously the split between capital market trading and managed investment was 80%-20%, by this year it had shifted to 55%-45%.
His advice to fund managers: “I only want to have the best capability. I don’t want a huge list, just one, two or three best capability that easily demonstrates best-of-breed and differentiation.”
Bacon is respected in the industry for his investment knowledge and direct approach. “He is someone whose communication makes sense, I qualify him as an opinion leader in the private banking world,” says one fund provider.
Head of fund advisory for Singapore
Appointed to this role in September this year, John Cappetta influences which products are added to the firm’s Asia conviction list for promotion to its team of bankers covering Southeast Asia.
Cappetta (pictured left) has spent his entire career in the funds industry, having started at Merrill Lynch Investment Management as a fund operations specialists 23 years ago. He was head of managed product sales in the international wealth management unit at Merrill before it was acquired by Julius Baer in 2013.
The Swiss bank’s fund selection team is centralised in Zurich, with two analysts in Asia. It has 30 funds in the Asia conviction list and promotes 10 of them at any one time.
Cappetta does not like opportunistic funds as he feels they are not suitable for a wide investor base, noting the product with the highest year-to-date inflows is a global absolute return strategy.
A New Yorker, Cappetta is unapologetically frank. “I am blunt and direct. You should know the fund selection process at Julius Baer, so don’t come to me with an idea unless it is unique.”
He prefers providers the bank works with to focus on the funds they already have on its platform. “Be thankful and give us the best marketing support, because there are 10-15 fund groups behind you that would love to be in that position,” he says.
Head of Asia investment management services
Morgan Stanley Private Wealth Management
Having joined Morgan Stanley in December 2013, Ernest Chan is responsible for management of all Asia fee-based products at its private wealth management unit, including hedge funds and private equity.
He leads a team of 11 on product strategy, selection and performance review. He also manages the discretionary portfolio offering together with counterparts in the US and London.
Chan (pictured right) is credited with expanding the funds platform at Morgan Stanley in Asia, where bankers and clients historically had been more engaged in trading activities. “We started educating bankers to diversify risk through funds as the market has been very volatile,” said Chan.
“Trading is still the bread and butter of Morgan Stanley," he noted. "But our discretionary and funds revenue [percentage] penetration rate has increased from single digit to double digits in the last two years.”
While Chan works closely with the US fund selection team, he can conduct due diligence from scratch in Asia and his regional team has autonomy to select funds for the region. Of the 1,000 funds on its master list, a few hundred are on the focus list in Asia.
His first question to providers is whether their funds are the best in their peer group: “We have all kinds of funds available on our platform," said Chan. "So we need to be convinced by compelling reasons to replace any of our recommended funds.”